What Are the Biggest Smart Contract Security Vulnerabilities in Crypto History?

The DAO hack in 2016 resulted in a $60 million loss

The summer of 2016 marked a pivotal moment in cryptocurrency history when The DAO, a decentralized venture capital fund operating on the Ethereum blockchain, suffered a catastrophic security breach. An attacker exploited a vulnerability in The DAO's smart contract code, siphoning approximately $60 million worth of Ether - representing about one-third of the fund's total value. This unprecedented attack exposed critical weaknesses in the emerging concept of "code as law" and challenged the fundamental premise that smart contracts could replace traditional human-dependent legal and financial processes.

| Aspect | Impact of The DAO Hack | |--------|------------------------| | Financial Loss | $60 million in Ether cryptocurrency | | Technical Response | Hard fork of the Ethereum blockchain | | Governance Implication | "Irregular state change" to reverse transactions | | Long-term Consequence | Raised fundamental questions about smart contract reliability |

The incident necessitated drastic measures from the Ethereum community, ultimately resulting in a controversial hard fork that essentially rolled back the blockchain's history to before the attack occurred. This decision created an ideological schism within the community regarding blockchain immutability principles. Despite this crisis, Ethereum subsequently evolved into a cornerstone of blockchain technology, with The DAO hack serving as a cautionary tale about the risks inherent in emerging decentralized systems and the importance of rigorous security auditing for smart contract code.

Parity wallet bug froze $300 million worth of Ether in 2017

In November 2017, the cryptocurrency world witnessed one of its most significant technical disasters when a critical bug in Parity's multi-signature wallet code resulted in approximately $300 million worth of Ether being permanently frozen. This catastrophic event occurred when a GitHub user identified as "devops199" exploited a vulnerability in the smart contract that controlled access to over 500 multi-signature wallets. The incident stemmed from an incorrectly coded smart contract used by Parity wallets to store tokens on the Ethereum network.

| Aspect | Details | |--------|---------| | Funds Affected | ~1 million ETH (~$300 million) | | Wallets Impacted | Over 500 multi-signature wallets | | Root Cause | Flawed smart contract implementation | | Previous Incident | July 2017: 150,000 ETH (~$30 million) stolen from Parity wallets |

What makes this case particularly frustrating is that the vulnerability had been reported months earlier but remained unfixed. According to security experts, the bug could have been addressed during previous audits of the code, yet it was overlooked. Despite numerous attempts to recover the funds through proposed Ethereum protocol changes, the affected Ether remains inaccessible to this day, serving as a stark reminder of the irreversible consequences that smart contract vulnerabilities can have in decentralized systems.

Centralized exchanges experienced multiple hacks totaling over $1 billion in losses

The cryptocurrency landscape has witnessed devastating security breaches targeting centralized exchanges, with cumulative losses exceeding $1 billion. In February 2025, Bybit experienced what might be the largest crypto theft in history, with hackers extracting approximately $1.5 billion worth of digital assets from their Ethereum wallets. This incident represents just one high-profile case in an alarming trend.

Security vulnerabilities in centralized exchanges have proven particularly lucrative for attackers, especially during periods of price appreciation. As noted by Kronos Research CEO Hank Huang, crypto exploits tend to increase alongside rising cryptocurrency valuations, creating high-value rewards for malicious actors targeting prime platforms.

| Year | Notable Exchange Hack | Amount Stolen | |------|----------------------|---------------| | 2021 | Poly Network | $611 million | | 2014 | Mt. Gox | $350 million | | 2025 | Bybit | $1.5 billion |

August 2025 alone saw approximately $163 million stolen across 16 separate attacks. These persistent security failures have profound implications for the cryptocurrency ecosystem, eroding user trust and highlighting the persistent risks associated with centralized custody models. Cybersecurity experts note a tactical shift among hackers toward targeting high-value entities and individuals with substantial holdings, necessitating enhanced security protocols throughout the industry.